The real danger of the COVID-19 Coronavirus is not actually the virus, but the perception of what the virus will do. One can point out that there is an interesting pattern of disease epidemics during election years (SARS in 2004, Avian flu in 2008, Swine flu in 2010, MERS in 2012, Ebola in 2014, and ZIKA in 2016) that is a study into itself, but that in each case, while people did die and there were serious medical complications for some, life continued on as normal. This is not to say that one should ignore the dangers of COVID-19, but rather to be balanced in one’s assessment. As I pointed out with a letter from a sufferer, he has stated that for the most part he is fine, except he has had to drink a lot of Gatorade, take ibuprofen, and rest.
What the virus has done is to cause panic and thus make factories shut down, interrupting supply chains and causing problems for American businesses because of the need to get parts from China. I have noted that it is likely part of a geopolitical program against the Chinese, but for the common man, this is less important, and what matters more is the effects it will have on him.
I have said this before, and I am going to say it again and keep saying it- most stocks will likely get severely beaten down, and people will lose a lot of money, because of the fear of the virus. People are afraid of this thing, and whether or not it is based on reason, people will react to it out of fear, and this will affect markets. The Wall Street Journal has reflected these sentiments according to a recent article about the virus.
In February, 129 companies in the S&P 500 discussed “coronavirus” in their quarterly earnings calls, up from 60 in January, according to a Wall Street Journal analysis of transcripts. There were nearly 600 mentions of the virus in companies’ security filings in the past week alone, according to Kaleidoscope, a research firm.
Executives have talked about how the virus will slow consumer spending on products from Crocs sandals to Gucci handbags. It has slowed production at nickel mines in Indonesia and halted the filming of “Mission Impossible 7” in Venice.
At the same time, many companies have cautioned it is too soon to tell how serious an economic problem the virus will be.
“Every CEO that I know has got to manage an employee dimension, supply-chain dimension, in many cases a revenue dimension,” as well as Wall Street’s needs, said Mike White, who ran PepsiCo Inc.’s international division in 2003 when SARS hit. He now sits on the boards of Whirlpool Corp., Kimberly-Clark Corp. and Bank of America Corp. “We’re still in the middle of the river here,” he said. (source)
As I said before, and I do not speak as a financial adviser at all, but an observer whose observations are based on patterns of public behavior and past actions, that there are three things that will likely do well:
-Plastics mutual funds (because most plastic is made in the US, as it will supply for Chinese shortages and also is tied to the biomedical industry)
-Biomedical mutual funds (because doctors need to buy equipment, so the people who make medical equipment will see increases in revenue)
-Precious metals (because they are traditional places for investors to hold value in during times of market instability)
This is not a time to be afraid, but rather to think clearly and make calculated decisions. Those who always prosper the most in times of chaos are not those who “follow the herd,” but think with their minds and act in accordance with right reason, not the temporary passions that men are inclined to.
Perhaps one of the best questions that one can ask is, “if the virus affected me, what would I do?” While it is not foolproof, and things are subject to change at any time (and always hopefully for the better, since one must desire the good will of one’s neighbor), it often gives a better metric into what one can expect of people in a similar case.